* Canadian dollar at C$1.3247, or 75.49 U.S. cents
* Bond prices mixed across yield curve
By Solarina Ho
TORONTO, June 26 (Reuters) - The Canadian dollar
strengthened against the U.S. dollar on Monday as oil prices
rose, and hung on to some of its gains even after the greenback
rebounded from earlier weakness.
Oil prices climbed off last week's seven-month lows, but
gains were capped by a relentless rise in U.S. supply and
bloated global inventories. U.S. crude prices rose 0.8
percent to $43.38 a barrel.
Amo Sahota, director at Klarity FX in San Francisco, said
the heavy summer driving season should help with the inventory
glut.
"If they don't, I think this market is in some real trouble
for oil and that's just going to keep weighing on the loonie,"
said Sahota. "That's going to act as a counter to what the
rhetoric has been from the Bank of Canada."
Earlier this month, the central bank shifted to a more
hawkish stance when its top two officials said rate cuts put in
place in 2015 had largely done their work.
At 4 p.m. ET (2000 GMT), the Canadian dollar was
trading at C$1.3247 to the greenback, or 75.49 U.S. cents, up
0.2 percent.
The currency traded between C$1.3213 and C$1.3277.
The greenback weakened initially after an unexpected
fall in new orders for key U.S.-made capital goods suggested a
loss of momentum in the manufacturing sector halfway through the
second quarter.
The U.S. dollar rebounded after European Central Bank chief
Mario Draghi defended the ECB's monetary policy.
Sahota said the market would look to Canada's monthly
economic growth data on Friday for further direction, and would
also watch closely for monetary policy clarity in upcoming
central bank speeches.
Governor Stephen Poloz will speak in Portugal on Wednesday.
The Bank will also release its business outlook report on
Friday.
Speculators cut bearish bets on the Canadian dollar for a
fourth straight week, data from the U.S. Commodity Futures
Trading Commission and Reuters calculations showed on Friday.
Canadian dollar net short positions fell to 82,881 contracts as
of June 20 from 88,595 a week earlier.
Data on Friday showing weaker-than-expected domestic
inflation has reduced the chances of an interest rate hike next
month from the Bank of Canada. But analysts expect policymakers
to stay hawkish amid concern that rates have been low for too
long.
Canadian government bond prices were mixed across the yield
curve in sympathy with U.S. Treasuries. The two-year
was down 1 Canadian cent to yield 0.903 percent and the 10-year
rose 12 Canadian cents to yield 1.463 percent.
(Additional reporting by Fergal Smith; Editing by Jonathan
Oatis)